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Issues Involved:
1. Retrospective operation of Section 34 of the Income-tax Act. 2. Jurisdiction of the Income-tax Officer under Section 34. 3. Applicability of Article 226 of the Constitution. 4. Constitutional law regarding legislative authority over pre-1947 income. Detailed Analysis: 1. Retrospective Operation of Section 34 of the Income-tax Act The principal question was whether the amended Section 34 of the Income-tax Act applies retrospectively. The court noted that the new Section 34, introduced by Act 48 of 1948, was intended to replace the old section entirely and was deemed to have come into force on 30-3-1948. The court emphasized that the new section should be read as part of the Income-tax Act from that date. The court held that the new section's language clearly extended its application to all assessment years ending within eight years from 30-3-1948 and subsequent dates. Therefore, the notices issued on 28-3-1951 for the assessment years 1942-43, 1943-44, and 1944-45 were within time and valid under the new section. The court rejected the argument that the new section could not apply to assessment years prior to 30-3-1948, stating that the section's express terms allowed for such application. The court clarified that the retrospective operation of the section was not a question of interpretation but a matter of clear legislative intent. 2. Jurisdiction of the Income-tax Officer under Section 34 The respondent contended that the conditions precedent for the Income-tax Officer to proceed under Section 34 were absent. The court examined the affidavit of the Income-tax Officer, which stated that the respondent had failed to disclose that it was a dealer in shares, leading to under-assessment. The court held that the Income-tax Officer had sufficient material to form a belief that income had been under-assessed due to non-disclosure of material facts. The court agreed with the earlier decision that the Income-tax Officer's satisfaction regarding the existence of conditions precedent was sufficient to give him jurisdiction under Section 34. The court also noted that the reasons for the Income-tax Officer's belief could be examined by a court only to see if there was some prima facie ground for the belief, not to assess the sufficiency of the grounds. Therefore, the court upheld the jurisdiction of the Income-tax Officer under Section 34. 3. Applicability of Article 226 of the Constitution The respondent had moved the court under Article 226 of the Constitution, seeking writs to prohibit the Income-tax Officer from proceeding with the reassessment. The court held that Article 226, despite its wide terms, did not release it from the limitations attached to high prerogative writs in England. The court found that the valuation of the grounds on which the Income-tax Officer formed his belief was not a matter for interference under Article 226. The court concluded that the respondent's contention did not warrant interference by means of a writ under Article 226. 4. Constitutional Law Regarding Legislative Authority Over Pre-1947 Income The respondent argued that the Dominion of India could not legislate for pre-1947 income as it belonged to the British Indian Government. The court found this argument untenable, stating that the Indian Independence Act granted India full legislative authority over its subjects and their affairs, including pre-1947 income. The court rejected the argument that the pre-1947 tax belonged to the British Power or that any agreement between India and Pakistan affected India's legislative authority. The court concluded that Act 48 of 1948, as part of India's municipal law, could validly apply to pre-1947 income. Conclusion The court allowed the appeal, set aside the judgment and order of the lower court, and dismissed the respondent's application with costs. The court certified the case for two counsel.
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